Why Is the Index Price Crucial for Risk Management in Perpetuals?

The Index Price is crucial because it serves as the foundation for the Mark Price, which determines when a trader's position is liquidated. By using a multi-sourced, tamper-resistant Index Price, the exchange ensures that liquidations are based on the asset's true market value, not on temporary price fluctuations or manipulative trades.

This provides a fairer and more predictable risk environment for traders.